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4 reasons life insurance is worth it

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Life insurance can be valuable for a variety of reasons.

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Taking out a life insurance policy can be a great gift to your family, such as if you want to leave them with money after you’re gone. Some life insurance types can also provide benefits like building a cash value that you can use during your lifetime.

Depending on your financial goals and risk tolerance, there can be many reasons to buy life insurance. Deciding whether life insurance is worth it can vary from person to person. Accordingly, it helps to understand some of the top reasons supporting purchasing a policy.

If you’re in the market for life insurance then start by getting a free online price quote now so you know exactly what to expect.

4 reasons life insurance is worth it

1. It can provide financial security for loved ones in the event of an early death

While we all pass away eventually, life insurance might be worth it if you’re trying to financially protect against early death. If you pass away relatively young, you might not be at the point where your spouse, children or other loved ones are financially secure.

For example, you and your spouse might be saving for retirement so that you both can stop working by age 65. But if you pass away when you’re, say, 60 years old, then that could put your spouse in a position where they need to work until 70 to afford retirement, such as if they still have a mortgage to pay off.

With life insurance, however, you could leave your spouse and/or kids with a nest egg or monthly payments if you pass away early.

Term life insurance can be particularly helpful for these types of scenarios. You might want protection for 10, 20, or 30 years, for example. But perhaps after that, your loved ones would be at a stage in life where they’re not as reliant on you for financial support, so you wouldn’t necessarily need permanent life insurance.

You can get a free term life insurance price quote online now.

2. It can be used as a cash asset while alive

While term life insurance might be used to guard against early death, you might leverage other life insurance types, like whole life insurance or universal life insurance, as a financial asset during your lifetime.

That’s because some life insurance types build a cash value that you might be able to make withdrawals from. Or, you might be able to use the money for other purposes, like directly paying life insurance premiums.

The terms around the cash value can vary depending on the insurance provider and the type of policy, so you’ll want to confirm the details with them. In some cases, cash withdrawals can mean surrendering your death benefit, for example, so you’ll want to know ahead of time what you’re getting into to make sure this form of life insurance is worth it to you.

3. It can provide peace of mind

Your life insurance value might not always result in a net financial gain. Still, you might prefer the peace of mind that life insurance provides, which can make it all worthwhile.

Perhaps you’ll spend money on a term life insurance policy that never gets cashed in (because, fortunately, you outlive the term), and it could be worth it to you to have that protection. Or, the cash value of your whole life insurance policy might not be as much as you’d make via your own investments, but perhaps you have more peace of mind getting a guaranteed return via your insurance provider.

4. It can help with estate planning

Another reason why life insurance is worth it for some people is that it can be used as part of your estate planning strategy. When your beneficiaries make life insurance claims, they often don’t have to include the proceeds as part of their taxable income, although interest received is taxable.

And while life insurance could trigger estate taxes, that only applies to those with very high levels of wealth; the lifetime estate and gift tax exclusion for 2023 is $12.92 million per individual.

So, depending on you and your family’s financial circumstances, you might prefer to leave some money behind via a life insurance policy, rather than, say, through a brokerage account, which could leave your heirs with capital gains taxes. 

The bottom line

These are some of the top reasons why life insurance is worth it for many people, but ultimately it’s up to you to weigh the costs versus the benefits. Different life insurance policies can vary significantly, such as for premiums, coverage amounts, and riders that let you customize policies.

So, consider reviewing different types of policies from different insurance providers to see if there’s one that’s worth it for you. Start by getting a free online price estimate now so you know exactly what to expect or use the table below to compare some top life insurance providers.

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